Kenanga Research & Investment

Daily technical highlights – (HARBOUR, HHGROUP)

Publish date: Fri, 03 Jun 2022, 09:10 AM

Harbour-Link Group Bhd (Trading Buy)

• Following a peak of RM1.73 in October 2021, HARBOUR’s share price fell to a low of RM1.03 (-40%) in May 2022 before climbing thereafter as the 20-day SMA plotted a golden cross over the 50-day SMA.

• With the 20-day SMA currently trending higher at a faster pace than the 50-day SMA, this indicates that the short-term momentum is intact.

• We believe the stock is poised to trend higher on the back of the positive technical signals arising from: (i) the stock treading above both its key SMAs, (ii) the MACD gaining bullish momentum, and (iii) the increasing ADX indicator.

• Thus, the stock could rise to challenge our resistance levels of RM1.52 (R1; 13% upside potential) and RM1.64 (R2; 21% upside potential).

• We have pegged our stop loss at RM1.21, which represents a downside risk of 10%.

• Business-wise, HARBOUR is engaged in: (i) the provision of shipping, marine and integrated logistics services, as well as (ii) the engineering and construction industry for the past 46 years with a geographical presence in the region of Malaysia and Singapore.

• For its recent results, the group’s core net profit rose by >100% from RM35.5m in 9MFY21 to RM83.2m in 9MFY22 due to improved contributions from both the shipping & marine and integrated logistics segments, lifted mainly by better freight rates and higher utilization of shipping space as economic activities picked up following the easing of movement controls.

• Valuation-wise, based on its book value per share of RM1.38 as of end-March 2022, the stock is currently trading at a Price/Book Value multiple of 0.98x (or at 1.5SD above its 3-year historical mean).

Heng Huat Resources Group Bhd (Trading Buy)

• After hitting a low of RM0.205 in September 2021, HHGROUP shares trended higher subsequently before slipping to RM0.275 on 3 April 2022. Since then, the stock has gapped up to cross above its 50-day SMA and continued its uptrend.

• With the Parabolic SAR indicator trending higher and the DMI Plus widening its gap from the DMI Minus, this suggests that the stock will likely strengthen further to challenge our resistance levels of RM0.405 (R1; 13% upside potential) and RM0.455 (R2; 26% upside potential).

• On the downside, our stop loss price has been set at RM0.32, which translates to a downside risk of 11%.

• Business-wise, HHGROUP – which is primarily engaged in the manufacturing and trading of biomass materials, mattresses and other related products – derives the bulk of its revenue from the biomass materials segment (accounting for c.80% of the group’s revenue).

• For FY Mar 22, the group recovered from a net loss of RM20.1m in FY21 to post a net profit of RM14.5m, thanks to better margins for the biomass products and higher sales quantity.

• Valuation-wise, based on its book value per share of RM0.95 as of end-March 2022, the stock is currently trading at a Price/Book Value multiple of 0.38x (or at 1SD below its 5-year historical mean).

Source: Kenanga Research - 3 Jun 2022

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